Notice

Check your options for getting out of debt

If you have lots of debts and are struggling to pay, there are things you can do to help you get out of debt.

You might be able to talk to your creditors and arrange a way to pay them, or make a formal agreement called a 'debt solution'.

You’ll need to decide what the best solution is for your situation. It’ll depend on things like:

the type of debts you have

the total amount of debt you have

how much money you can pay towards your debts

If you have some money to pay your debts, you could arrange to pay off your debts over a few years. You might be able to get a debt management plan, an administration order or an individual voluntary arrangement (IVA).

If you don’t have any money to pay your debts there are still options that could help you. If you owe less than £20,000, you might be able to apply for a Debt Relief Order (DRO). If you owe more than £20,000 applying for bankruptcy might be an option.

Different debt solutions can affect your life in different ways. For example, they might affect your credit rating, mortgage or savings, or restrict the work you can do. Make sure you understand how you'll be affected before you apply for a debt solution.

Talk to your creditors

Before you explore any debt solutions it's important to talk to your creditors. You might be able to come to an agreement with them to pay off your debts, or get more time to work out your situation. Find out about making a plan to pay your creditors.

If you've already agreed to make payments to your creditors you should still check if other debt solutions could help you - there might be a better way forward.

If you don’t feel able to talk to your creditors directly, or they won’t agree to your offers, check if you can use another solution.

Check if you can get a debt management plan (DMP)

If you get a debt management plan you agree to pay off your debts with one monthly payment to a DMP provider. The DMP provider is an independent company. They’ll deal with your creditors for you and make your payments.

How long your DMP lasts will depend on how much debt you have and how much you can pay off each month.

Anyone can get a DMP - it doesn’t matter how much debt you have. You might be able to get a DMP if:

you can pay your priority debts but you’re struggling to pay other debts like credit cards and loans

you can pay at least £5 a month towards each of your debts

You can change your DMP at any time, for example if your income increases and you can afford to pay more.

You can cancel your DMP at any time if you decide it’s not the right debt solution for you or you’re struggling to pay. If you haven’t finished paying off your debts you’ll need to contact your creditors to arrange another way to pay.

Check if a DMP is right for you

If you’re thinking about getting a DMP it’s important to know:

it doesn’t usually include priority debts so might not help you if you’re struggling with your rent or council tax, for example

it can take a long time to pay off your debts if you’re only making small payments

your creditors don’t have to agree to the plan and they can stop accepting it or ask for more money at any time - it isn’t a legal agreement

Getting a DMP

Don’t pay for a DMP - you can get one for free. If you pay for your DMP the DMP provider will take part of your monthly payment to cover their fees. This means less money will go to your creditors and it’ll take you longer to pay off your debts.

Check if you can get an administration order

If you have an unpaid county court or high court judgment, you might be able to get an administration order to help you pay off your debts. This means you agree to pay off your debts with one monthly payment to the court.

The court decides how much you have to pay. Your creditors can object to what the court suggests but the court has the final decision. The court will pass the money on to your creditors and deal with them for you.

Your creditors can’t contact you about the debts included in the order while it’s in place or take any action against you to get their money back. They also can’t add interest to the amount you owe them.

You might be able to get an administration order if you:

have more than one debt

owe less than £5,000

have an unpaid county court or high court judgment

Check if an administration order is right for you

An administration order might not be the best debt solution for you. It’s important to know:

it could take you a long time to pay off your debts - the court might limit it to 3 years but this will depend on your situation

Check if you can get an individual voluntary arrangement (IVA)

If you get an IVA you agree to pay off your debts with one monthly payment, usually over 5 years.

Your IVA will be organised by a specialist, called an insolvency practitioner. This will usually be a solicitor or an accountant and they’ll deal with your creditors for you.

You’ll have to pay the insolvency practitioner for their services. The fees will be added to your repayments. The fees for an IVA can vary and are usually much higher than for other debt solutions. If you get an IVA you should make sure you understand how much you’ll have to pay the insolvency practitioner and when.

Not all your creditors need to agree to an IVA for you to get one. You'll need the agreement of creditors who cover at least 75% of the total amount you owe. Read more about how creditors agree to an IVA proposal.

Your creditors can't contact you about the debts included in the IVA while it's in place or take any action against you to get their money back.

Getting an IVA

Getting an IVA can have a big impact on your life. It's important you get advice before you get an IVA. Contact your nearest Citizens Advice - they can help you compare your options and decide if an IVA is right for you.

If after getting advice you think an IVA is right for you, you’ll need to find a specialist insolvency practitioner. You won’t be able to set up an IVA on your own. You can contact different practitioners to compare costs and find the best deal for you.

It’s worth finding a specialist close to where you live because it's usually best to meet them in person.

If you still don’t have enough money to pay your debts you might be able to:

get a Debt Relief Order

apply for bankruptcy

Check if you can get a Debt Relief Order (DRO)

If you get a DRO, you won’t pay anything towards the debts in the order for 12 months. At the end of the 12 months you'll no longer owe those debts. While the DRO is in place your creditors can’t ask you to pay any debts included in it or start any action against you.

You might be able to get a debt relief order if:

you owe £20,000 or less

you have £50 or less left over each month after paying your living costs

you don’t own your home or a car worth £1,000 or more

you have £1,000 or less in savings and other assets

you haven’t been given another a DRO in the last 6 years

you’ve lived or worked in England or Wales for the last 3 years

You might find it harder to get a DRO if in the last 2 years you’ve made payments to one creditor but ignored others, given away valuable things you own, or sold things you own for less than they were worth.

If it’s found that you made your situation worse, or acted dishonestly, you might be given a debt relief restrictions order (DRRO). A DRRO will extend your debt relief order so the restrictions last longer than 12 months. Read more about debt relief restrictions orders.

you’ll have to tell the creditor about your DRO if you want to borrow more than £500 during the 12 months

you won’t be able to set up your own company or be a director or another company, even under a different name, without the court’s permission

If you get a DRO but your situation improves during the 12 months - for example if your income goes up or you get a payment for backdated benefits, the DRO can be stopped. You won’t get your £90 application fee back. Check what to do if your circumstances change.

Getting a DRO

You’ll need to apply through an authorised debt adviser, called an 'approved intermediary'. You won’t be able to apply for a DRO on your own. They should help you gather the information you need to apply for a DRO. They also have to:

Check if you can apply for bankruptcy

You might be able to apply for bankruptcy if you can't pay your debts and the amount you owe is more than the value of the things you own.

The bankruptcy period usually lasts 12 months. If you go bankrupt your creditors won’t be able to contact you about your debts or take you to court.

Bankruptcy can have very serious consequences, for example you could lose your home or your job. It's important to understand how it could affect you and get help from your nearest Citizens Advice before applying.

There are strict rules to follow if you apply for bankruptcy. Some of the rules apply for the time before you applied for bankruptcy. You could go to prison or get a fine if you’ve done anything that counts as a bankruptcy offence. You could also have restrictions put on you by the court which make your bankruptcy period longer. Check what counts as a bankruptcy offence.

If you have no spare income

You won't have to pay any money towards your debts during the bankruptcy period if either:

your only income is benefits

you have less than £20 a month to pay towards your debts

You won’t have to pay the money back but going bankrupt could still have a big impact on your life.

If you owe less than £20,000 and don’t own your home, a Debt Relief Order might be a better option for you.

If you're earning and have a small amount spare

You might be asked to make payments towards your bankruptcy debts during the 12 months. This is called an income payments agreement (IPA). IPAs usually last for 3 years.

If you don’t agree, the court can make an income payments order so your creditors get payments straight from your salary.